Emerging Markets and the New Geography of Trade: The Effects of Rising Trade Barriers

RePEc Short ID: pre502
ORCID iD: 0000-0003-4735-7472

Reyes-Heroles, Ricardo M.; Traiberman, Sharon; Van Leemput, Eva

doi:10.17016/IFDP.2020.1278

Working Paper

Emerging Markets and the New Geography of Trade: The Effects of Rising Trade Barriers

Abstract: Protectionist sentiments have been rising globally in recent years. The consequences of a surge in protectionist measures present policy challenges for emerging markets (EMs), which have become increasingly exposed to global trade. This paper serves two main purposes. First, we collect several stylized facts that characterize EMs' role in the new geography of trade. We focus on differences between advanced economies (AEs) and EMs in trade linkages, production structures, and factor supplies. Second, we build a dynamic, general equilibrium, quantitative trade model featuring multiple countries, sectors and factors of production. The model is motivated by and geared to jointly match the facts we present. We use the model to estimate the long-run global impacts of rising trade barriers on EMs|both direct impacts and spillovers through third-country effects. Heterogeneity in openness, production structure, trade linkages, and factor supplies leads to large differences between the impacts on AEs versus EMs. We find that variations in both technological comparative advantage and factor supplies play key roles in shaping these differences.

Keywords: Emerging market economies; Trade barriers; Comparative advantage; Dynamics;

JEL Classification: E22; F10; F40; F62; O11;

https://doi.org/10.17016/IFDP.2020.1278